Subject:
General Fund Draft Budget and Resources Update – 2026-27 to
2029-30
Date of
meeting: Thursday, 11 December 2025
Report
of:
Cabinet Member for Finance and City
Regeneration
Lead
Officer:
Name: Chief Finance Officer
Contact
Officers: Name: John Hooton, Haley
Woollard
Email: john.hooton@brighton-hove.gov.uk
haley.woollard@brighton-hove.gov.uk
Ward(s)
affected: All Wards
Key Decision:
Yes
Reason(s) Key: Expenditure which is, or the making of savings which are,
significant having regard to the expenditure of the City
Council’s budget, namely above £1,000,000 and Is
significant in terms of its effects on communities living or
working in an area comprising two or more electoral divisions
(wards).
For general
release
1
Purpose of Report & Policy Context
1.1
This report provides a budget planning and resource update
as a key part of the preparation for the 2026/27 annual budget and
Council Tax setting process together with Medium Term Financial
Plan projections over the next 4-year period, including any changes
in assumptions and estimates together with a high level assessment
the key impacts of the government’s Autumn Statement,
announced 26 November 2025, and the Local Government Finance Policy
Statement announced 20 November 2025, as far as they can be locally
interpreted.
1.2
The council aims to align all spending, ringfenced and
un-ringfenced, to support the achievement of Council Plan outcomes
and priorities. The General Fund budget in particular is an
expression of the Council Plan in financial terms and aims to
ensure that revenue and capital budgets and investment plans are
aligned to achieving the outcomes of the Council Plan for a
‘better Brighton and Hove for all’.
2
Recommendations:
That Cabinet:
2.1
Note the updated forecasts
including funding assumptions and net expenditure projections
included in this report.
2.2
Note the updated predicted
budget gaps totalling over £86 million over the Medium Term
Financial Strategy period, including £24.926m in
2026/27.
2.3
Note the draft savings proposals totalling £12.446m at
Appendix 1.
2.4
Note the draft accompanying Equality Impact Assessments (EIAs) at
Appendix 4, and note that the final EIAs will be provided to
Cabinet and Budget Council in February 2026.
2.5
Approve the extension of the
Innovation Fund to 2029/30, committing additional total funding of
£8.140m, as detailed in Section 6, to ensure the continuation
of transformational activity across the full Medium Term Financial
Strategy period to 2029/30.
2.6
Approve the release of £1.041m of earmarked reserves into a
new general risk reserve as set out in Section 8 and Appendix
5.
2.7
Note that plans to arrive at a
legally balanced budget for 2026/27, and the legal requirement to
set a Council Tax will be presented to Cabinet and Budget Council
in February 2026.
2.8
Note that projections for next
year and the Medium Term Financial Strategy (MTFS) will be updated
following the announcement of the Provisional Local Government
Finance Settlement, expected week commencing 15 December
2025.
3
Context and Background Information
Overview
3.1
The General Fund Budget &
Resources update to July Cabinet outlined that the context for
budget setting remains very challenging. There are significant
budget pressures arising from increases in demand from statutory
services, particularly temporary accommodation, adults and
children’s placements, and home to school transport. In
addition, there are various other pressures across the council in
terms of demand, pressures on income sources and the cost of
providing services over and above inflation. These pressures are
the key drivers of the budget shortfalls over the MTFS, as the
anticipated increase in resources is largely expected to fund the
inflationary increase in the cost of delivery services over the
period.
3.2
Compounding this, the
government’s review of the allocation of local government
resources under the Fair Funding Review, coupled with the Business
Rates Reset, is expected to result in the council’s core
spending power increasing much more slowly than the assumptions
within the MTFS, resulting in lower resources than previously
anticipated.
3.3
Consequently, the July report
estimated an expected budget gap of nearly £40 million in
2026/27 and more than £95 million over the 4-year MTFS
period.
3.4
The council’s financial
sustainability is also impacted by the low level of reserves held
compared to other similar sized authorities. The authority is
therefore unable to withstand significant financial shocks at a
time where financial risks to councils are arguably greater than
they have ever been.
3.5
The report in July indicated the authority would need to take a
longer-term view and focus on managing the pressures being faced by
the authority and taking a transformation approach to planning to
meet the budget shortfalls forecast over the 4-year period and to
bring the authority into a more sustainable financial
position.
3.6
A substantial amount of work
has taken place between July and December on the Council’s
budget position, particularly in terms of working to
reduce/mitigate pressures. This work, alongside reviewing the
capital programme and incorporating the updated pensions employer
contributions, has resulted in an updated budget gap for 2026/27 of
£24.926m. Savings proposals have been identified of
£12.446m, leaving a remaining gap of £12.480m. Further
work is ongoing to identify further savings, as well as assessing
the impact of the Fair Funding Review on the Council’s
funding position. If further savings proposals cannot be found, or
if the projected government funding position is not significantly
improved, then the Council would need to apply to the government
for exceptional financial support.
3.7
As well as balancing the budget
for 2026/27, the Council needs to develop a comprehensive medium
term financial plan that addresses its budget gap over the 4 year
period to 2030. The Council’s transformation programme is the
mechanism for developing this plan. Good progress has been made on
this, but there is much more to do, further detail is set out in
section 5 of this report.
National Context
3.8
The Local Government Finance
Policy Statement (policy statement) was published by the government
on 20 November 2025, outlining the government’s approach to
funding local government over the multi-year settlement period of
2026/27 to 2028/29. In addition, the government also published its
outcome responses to both the Fair Funding Review 2.0 (FFR)
consultation and the Business Rates reset (BRR) consultation; both
of which were consulted upon earlier in 2025.
3.9
The Provisional Local Government Finance Settlement (Provisional
LGFS) is expected to be announced the week commencing 15 December
2025. Whilst this leaves some uncertainty over the council’s
final funding position for 2026/27 until the provision LGFS is
published, the announcement will be the first multi-year settlement
since 2016, providing certainty for the council as to its level of
resources over the three-year period to 2028/29. This will in turn
facilitate planning and provide certainty over the extent of the
transformation activity required over the next three years.
3.10
The policy statement set out that an additional £3.4 billion
new grant funding would be delivered through the multi-year
settlement. Taken together with the 2.99% core council tax and 2.0%
ASC precept, this will result in a 2.6% real terms increase in core
spending power across the multi-year period. It’s important
to note, however, that this 2.6% is an average increase; the Fair
Funding Review and Business rates reset will ultimately
redistribute funding across all Local Authorities, and therefore
actual changes in core spending power will be very different across
local authorities.
3.11
Paragraphs 4.2 to 4.9 provide more detail on the announcements
within the policy statement, the outcome of the fair funding review
consultation and the expected impact on the council. A pressure of
£6.000m was included to reflect the expected impact of the FFR
on the authority. Whilst there has been some changes in the
principles and methodology from what was consulted on, these are
not expected to make a significant impact compared to what was
already included in the MTFS within the July Report.
3.12
The government published its
Autumn Budget on 26 November 2025, which announced several changes
that will impact on Local Authorities going forwards. Most notably,
the budget confirmed that the government’s plans for Special
Educational Needs & Disabilities (SEND) reforms will be
announced early in the new year, including the announcement that
the current statutory override will be extended for a year.
Additionally, the government will not be expecting local
authorities to meet future funding implications for SEND within the
general fund once the override ends at the end of
2027/28.
3.13
Paragraph 4.1 provides further
information about the government’s Autumn Budget
Local Financial Planning
Context
3.14
The Targeted Budget Management (TBM) Month 7 report (elsewhere on
this agenda) shows a forecast overspend of £7.776m for
2025/26. The key drivers for the overspend are adults and
children’s social services, home to School transport, and
Homelessness and Temporary Accommodation. These are the same key
drivers of the council’s service pressures across the MTFS.
In particular, the council has seen a sharp increase in families
presenting as homeless and a corresponding increase in the cost of
providing temporary accommodation, which is one of the major
challenges facing the authority currently.
3.15
The Council’s reserves
are at a critically low level, and one of the lowest levels in the
country across unitary authorities. This creates significant issues
in terms of the Council’s inability to withstand financial
shocks (for example unexpected costs or increases in demand for
statutory services). Diligent financial management over the past
two years has seen the Council’s General Fund working balance
increase from under £7 million to a current position of
£9 million. The target level of un-ringfenced General Fund
reserves (i.e. General Fund working balance and General risk
reserve) over the MTFS period is £12-£15 million. Given
the current overspend position at TBM7, the Council’s Chief
Finance Officer is undertaking a review of all earmarked reserves
and will bring all funds that are not contractually committed into
the risk provision, to ensure that these are available to offset
in-year overspend position.
3.16
The Council has received a few
recommendations in respect of its level of reserves and lack of
financial sustainability. The external auditors have raised a
significant weakness in respect of financial sustainability, and
the LGA Corporate Peer Challenge highlighted financial
sustainability as the Councils top issue, noting that it needed to
prioritise a plan to increase its level of reserves at
pace.
4
Resources and Planning Assumptions 2026/27
Autumn Statement 2025
4.1
The government published it’s Autumn Budget on 26 November
2025, which included the following key headlines:
·
The
abolishment of the two child limit for Universal Credit claimants,
which will help the City’s poorest households;
·
Extension of the
current override for deficits on the Dedicated Schools Grant (DSG)
to March 2028, and the announcement that the government does not
expect local authorities to continue to fund deficits within the
general fund after the override ends. SEND Reform plans will be
announced in early 2026;
·
A
council tax surcharge to be introduced in April 2028 for high value
properties over £2 million, which will be used to support
local government services;
·
Additional
funding of £48 million to go into the Planning system to boost
capacity and capability over the next three years;
·
Announcement of
plans to allow authorities to introduce an overnight visitor levy,
along with a consultation regarding the design;
Local Government Finance Policy Statement
4.2
The Local Government Finance Policy Statement 2026/27 to 2028/29
(policy statement) was published on the 20 November 2025 alongside
the government’s outcome response to the Fair Funding Review
2.0 consultation.
4.3
The policy statement sets out the government’s proposals for
the 2026/27 to 2028/29 multi-year local government finance
settlement. Whilst the policy statement does not provide individual
allocations for authorities, it does provide the principles for
allocations ahead of the Provisional Local Government Finance
Settlement (LGFS). Uncertainty over actual allocations will remain
until the Provisional LGFS is announced, likely to be week
commencing 15 December 2025.
4.4
The FFR 2.0 aims to align funding with local need and deprivation
whilst simplifying and consolidating multiple fundings streams for
local authorities. This is the most significant change in local
government funding since 2013. In addition, the Provisional LGFS
will be the first multi-year settlement announced since the
four-year settlement of 2016, allowing local authorities better
certainty and ability to plan over the medium term.
4.5
As a result of the consultation, the government has made some
changes to the formula methodology as well as increasing
protections by introducing new funding floors for those authorities
losing from the funding reforms. This increase in protection will
result in all authorities moving incrementally to their new funding
allocations over the settlement period.
4.6
The policy statement also confirmed the continuation of the
Recovery Grant of £600 million, first distributed in 2025/26
to 50% of authorities based on tax raising ability and deprivation.
This will continue to be allocated across the settlement period on
the same methodology as 2025/26, which demonstrates the
government’s objective of distributing funding to those areas
that need it most. The council did not receive any of the 2025/26
recovery grant and will therefore not receive any recovery grant
over the settlement period.
4.7
The government confirmed additional local government funding of
£3.4 billion over the settlement period, previously announced
in the Spending Review in June 2025. The phasing of this additional
funding is yet to be announced. The policy statement did confirm,
however, that this funding included specific allocations of
£900 million for Adult social care and £547 million for
Children’s Social Care over the settlement period. MHCLG have
also confirmed that new burdens funding for food waste is included
in the £3.4 billion.
4.8
What is not clear, but is assumed, is whether the total £3.4
billion includes the following allocations:
·
the additional protection floors being provided;
·
the continuation of the Recovery Grant of £600 million as
announced as part of the policy statement.
4.9
The changes to the funding model are complex, At the time of
writing, officers are working with local government finance experts
to model and understand the likely impact of these changes will
have on the Council’s funding for 2026/27 to 2028/29. It is
likely that there are changes that will be both favourable and
unfavourable to the Council’s position, and therefore until
the Provisional LGFS is announced, the prevailing assumptions will
remain in the MTFS.
Revenue Investment to Support
Council Plan Priorities
4.10
The Council Plan 2023 to 2027 (as refreshed in July 2025) sets out
a vision for Brighton & Hove to be a city to be proud of, a
healthy, fair and inclusive city where everyone thrives. To deliver
the vision of a Better Brighton and Hove for All, the council aims
to be a learning council with well-run services.
4.11
Estimates for the need for investment in services, increased cost
of delivering services and changes in demand for services in order
to deliver the Council Plan are reviewed and updated regularly
throughout the year. The below tables compares the estimates
included in the July report (using TBM2 data up to May 2025) and
current estimates (which use TBM6 data up to September 2025).
|
Table
1:
Council Plan
Investments & Service Pressures
|
Original
Recurrent Investment & Pressures 2026/27
(July)
|
Original
Recurrent Investment & Pressures 2026/27
(Nov)
|
Movement
|
|
|
£m
|
£m
|
£m
|
|
A City to be
proud of:
|
|
Closure of New England House pending decision on
the future of the building
|
1.200
|
1.200
|
-
|
|
Tree Disease Management
|
0.300
|
0.300
|
-
|
|
Investing in the future of service delivery
(including revenue impact of assets to deliver services)
|
0.832
|
0.600
|
(0.232)
|
|
All other investments and pressures
|
0.428
|
0.580
|
0.152
|
|
A City to be
proud of: Total
|
2.760
|
2.680
|
(0.080)
|
|
A
fair & inclusive city
|
|
Housing - Temporary Accommodation
|
10.951
|
11.106
|
0.155
|
|
Loss of Housing Benefit Subsidy
|
0.400
|
2.400
|
2.000
|
|
Expected loss of grant funding
|
0.687
|
0.700
|
0.013
|
|
All other investments and pressures
|
0.255
|
0.549
|
0.294
|
|
A
fair & inclusive city: Total
|
12.293
|
14.755
|
2.462
|
|
A healthy city
where people thrive
|
|
Home to School Transport - Cost &
Demand
|
1.285
|
1.285
|
-
|
|
Children’s Agency Placements
|
3.378
|
1.811
|
(1.567)
|
|
Children’s Disability Placements
|
0.583
|
0.483
|
(0.100)
|
|
Supporting Adults with Physical Needs
|
2.932
|
0.793
|
(2.139)
|
|
Supporting Adults with Learning Disability
Needs
|
1.679
|
0.625
|
(1.054)
|
|
Supporting Adults with Mental Health
Needs
|
3.732
|
0.891
|
(2.841)
|
|
Supporting children with complex needs
in-house
|
0.452
|
0.301
|
(0.151)
|
|
Family Hub & preventative children’s
services
|
0.580
|
0.637
|
0.057
|
|
Support for Increased SEN Demand
|
0.469
|
0.366
|
(0.103)
|
|
Other Educational Services &
Support
|
1.180
|
0.547
|
(0.633)
|
|
All other investments and pressures
|
0.385
|
-
|
(0.385)
|
|
A healthy city
where people thrive: Total
|
16.655
|
7.739
|
(8.916)
|
|
A
learning council with well-run services
|
|
Loss of Funding from FFR
|
6.000
|
6.000
|
-
|
|
Investment in Emergency Planning
service
|
-
|
0.150
|
0.150
|
|
Estimated cost of changes in Digital Innovation
service
|
0.430
|
0.390
|
(0.040)
|
|
Income pressure within commercial property
portfolio
|
-
|
0.201
|
0.201
|
|
New policy announcement re Cllrs in
LGPS
|
-
|
0.100
|
0.100
|
|
All other investments and pressures
|
0.802
|
1.929
|
1.127
|
|
A
learning council with well-run services: Total
|
7.232
|
8.770
|
1.538
|
|
Total
Council Plan Investments & service pressures
|
38.940
|
33.944
|
(4.996)
|
4.12
Pressures are reviewed regularly through the year and updated based
on demographic and demand changes, as well as management actions
undertaken to mitigate and address pressures.
Council Tax
4.14
The council tax increase for
2026/27 and future years of the MTFS is currently assumed at 4.99%,
which includes the continuation a 2.0% increase for an Adult Social
Care Precept. These council tax increase levels were recently
confirmed for the next 3 years in the local government finance
policy paper as the maximum increases without requiring a
referendum.
4.15
The impact of the current
financial climate on council tax income continues to be difficult
to predict. New housing developments have been assumed for 2026/27,
with a council tax base increase assumed of 0.87%. Over the last
few years, the cost-of-living crisis has impacted on the council
tax collection rate. It is therefore assumed to remain at the
2025/26 level of 98.75% rather than reverting to the pre-pandemic
level of 99%.
Business Rates
4.16
The government is introducing
significant changes to the business rates system in 2026/27. This
includes:
·
The introduction of three new multipliers which will
provide a more complex system for assessing the business rates
liability of different types of businesses;
·
A full Business Rate Reset, designed to redistribute growth
accumulated by authorities since 2013/14;
·
A new rating valuation list. This will update the rateable
values for all properties, adding further uncertainty in the level
of business rates income.
4.17
The Business Rate Reset is
expected to result in a loss of locally retained business rates;
the business rate income from 2026/27 will be based on the revised
settlement funding assessment which will be derived from the
changes implemented by the Fair Funding Review. The reduction of
business rates income is included in the £6.000m pressure in
2026/27 for loss of resources in relation to the Fair Funding
Review and Business Rates Reset.
4.18
Business Rates forecasts
continue to be an area of financial risk that is heightened by the
unknown impacts of global financial events and the impact of
current economic conditions on businesses. In addition, appeals
continue to have a significant impact on forecasting business rates
and the new valuation list will have its own level of appeal
activity to forecast. Therefore, business rates estimates could
change significantly ahead of setting the budget.
4.19
The provisional Local
Government Finance Settlement is due week commencing 15 December
2025 at which time the level of assumed locally retained business
rates will become much clearer.
Corporate
Planning Assumptions
4.20
The July Cabinet report included an Appendix which outlined the
corporate planning assumptions within the MTFS at that time. The
current assumptions are included in Appendix 2 of this report.
4.21
The only change in core planning assumptions compared to those
reported in July is the change in the Council’s employer
pension contribution rate. The council’s contribution to the
Local Government Pension Fund is agreed every three years based on
a triennial actuary review of the fund’s assets and expected
liabilities. Following the most recent triennial review of the East
Sussex Pension Fund by the fund’s actuary, the
council’s pension fund assets are forecast to be in excess of
the fund’s liabilities by the next triennial review. This has
resulted in an agreed reduction of the council’s Employer
Contribution rate by 4.9% from 19.8% to 14.9% for the next three
years. Therefore, the council’s cost of employer
contributions is expected to reduce by £6.920m per annum from
1 April 2026.
Fees & Charges
4.22
The vast majority of Fees and
Charges budgets for 2026/27 are assumed to increase by a standard
inflation rate of 3.00%. The February Budget report will include an
appendix of all fees & charges for 2026/27 that are required to
be approved in advance of the financial year.
4.23
A number of budget proposals within Appendix 1 report are linked to
proposed changes in fees or charges. The changes in fees and
charges linked to these draft proposals will be included in the
February report.
Commitments
4.24
The budget projections for 2026/27 includes commitments of
(£1.788m), reflecting corporate changes and decisions already
made. This represents a reduction in commitments of £10.019m
compared to the commitments included in the July Report.
4.25
The below table shows the change in commitments between July &
November:
|
Table 2:
Commitments in the 2026/27 budget:
|
Jul
2025
Estimate
|
Dec
2025
Estimate
|
Movement
|
|
|
£m
|
£m
|
£m
|
|
Budget
Commitments (including capital financing)
|
3.839
|
0.740
|
(3.099)
|
|
Mainstream
Digital funding
|
0.550
|
0.550
|
-
|
|
Change in
contribution to reserves
|
3.015
|
3.015
|
-
|
|
2025/26 Pay Award
above modelled allowance
|
0.827
|
0.827
|
-
|
|
Change in
Employers Pension Contribution
|
-
|
(6.920)
|
(6.920)
|
|
Total Budget
commitment
|
8.231
|
(1.788)
|
(10.019)
|
4.26
The primary movement is the change in employer pension contribution
rate, as described in 4.21 above. Other significant changes include
the impact of the 2025/27 capital programme review, and changes
relating to the one-off use of grant to cover core budget
expenditure.
5
Annual Budget and Medium Term
Finance Plan Estimates
5.1
There are significant challenges to being able to balance the
2026/27 and the Medium Term Financial Plan (MTFP). Section 3 gives
some wider context on the challenges being faced by the
organisation both on a national level and locally. The 2026/27
budget shortfall as reported in July 2025 was the largest seen by
the authority, largely due to the cost of and demand for a number
of statutory services. This requires the authority to take urgent
action to mitigate demand pressures and identify savings and
transformation programmes that will address the gap both in 2026/27
and across the medium term. This is necessary to become a
financially sustainable organisation. Identifying savings is
becoming increasingly more difficult; the organisation has been
required to make cumulative savings of more than £248 million
since 2010.
5.2
In addition, the government have consulted on the largest changes
in Local Government Funding since 2013. Whilst estimates have been
made as to the council’s expected ongoing funding position
from both the Fair Funding review and the related Business Rates
Reset (BRR), there will not be certainty on the outcome and impact
of these changes until the Provisional Local Government Finance
Settlement, expected to be announced in the third week of December.
However, it must be acknowledged that why this brings uncertainty
until announced, when announced, local authorities will have
increased certainty over the medium term than has been the case in
a number of years due to this being the first multi-year settlement
since 2016.
5.3
Lastly, the Council Tax Base and Business Rate Tax Base will be set
by Cabinet in January 2026.
5.4
The table below shows the current estimate for the 2026/27 budget
gap and how it’s moved from July report.
|
Table 3: Budget
Gap Latest 2026/27
|
£m
|
|
Budget Gap per
July Cabinet Report
|
39.765
|
|
Reduction in
Council Plan investments & service pressures (table
1)
|
(4.996)
|
|
Impact of Capital
Programme Review
|
(1.309)
|
|
Impact of Change
in Employer Pension Contribution
|
(6.920)
|
|
Short term
borrowing costs for King Alfred Leisure Centre
|
0.634
|
|
Change in use of
grants
|
(2.408)
|
|
Other
Changes
|
0.160
|
|
Budget Gap before
Savings Proposals
|
24.926
|
|
Draft Saving
Proposals to date (Appendix 1)
|
(12.446)
|
|
Remaining Budget
Gap
|
12.480
|
5.5
Table below shows that the budget shortfalls is estimated at
£86.658m over the MTFS before any savings proposals are
considered.
|
Table 4: Budget
Gaps – 2026/27 to 2029/30
|
2026/27
£m
|
2027/28
£m
|
2028/29
£m
|
2029/30
£m
|
|
Commitments &
decisions already made
|
(1.788)
|
2.296
|
1.323
|
1.224
|
|
Net inflation (on
Pay, Prices, Income, Pension)
|
9.691
|
9.437
|
10.191
|
10.478
|
|
Service Pressures
(Demand and Cost)
|
33.944
|
25.132
|
25.112
|
19.661
|
|
Funding Changes
(RSG & Tax Base)*
|
(16.921)
|
(13.845)
|
(14.258)
|
(15.019)
|
|
Budget Gap before
Savings Proposals
|
24.926
|
23.020
|
22.368
|
16.344
|
|
Draft
Saving Proposals to date (Appendix 1)
|
(12.446)
|
-
|
-
|
-
|
|
Draft
MTFS proposals (Table 5)
|
|
(9.075)
|
(8.025)
|
(4.259)
|
|
Remaining Budget
Gap
|
12.480
|
13.945
|
14.343
|
12.085
|
*This value will change following
the Provisional Local Government Finance Settlement expected to be
announced week commencing 15 December 2025. Currently there is a
service pressure included to reflect the expected changes from the
Fair Funding Review.
5.6
Table 4 shows there would be a remaining shortfall of £52.853m
based on current draft proposals within Table 5 and Appendix
1.
5.8
There is clearly still some way to go to ensure that the authority
can reach a balanced budget in 2026/27 and a balanced MTFS,
which will be addressed in the February report.
Addressing the Budget Gap – 2026/27 and over MTFS
5.9
There has been several workstreams and activity to address the
budget shortfalls over the MTFS:
·
A
Capital Programme Review has been undertaken to ensure the
programme is properly prioritised and funded over the 5-year
Capital Investment Programme, given the current strain on the
revenue budget. This workstream has identified areas for
prioritisation, de-prioritisation and deferral which provide saving
and reprofiling of borrowing costs from the 2026/27
budget;
·
A
Transformation & Innovation portfolio containing a number of
strategic programmes has been established as described more fully
in section 6 and Appendix 3. These programmes will use the
Innovation Fund to strategically address areas of pressure and to
exploit commercial opportunities which will help transform the
council into a financially sustainable organisation by the end of
the MTFS;
·
An
Asset Management Strategy has been developed, which both identifies
capital disposals to support the Innovation Fund and Transformation
programmes, and which can contribute to ongoing revenue savings via
the reduction of the council’s property
portfolios;
·
A
benchmarking exercise has been undertaken across the organisation
to identify areas for further investigation. This work has been
taken into account in both identifying savings proposals and
transformation opportunities;
·
Directorate
Leadership Teams (DLTs) have rigorously reviewed service areas for
efficiencies and savings, taking into account transformation
programmes and service benchmarking.
5.10
Appendix 1 provides detailed draft budget proposals that have
arisen thus far from the work described above.
5.11
A portfolio of strategic programmes (see section 6 and Appendix 3)
is being developed that underpins the Council’s financial
sustainability. It is really important that the Council develops
medium and longer term plans to improve efficiency and reduce
demand as these programmes take time to implement successfully.
They will also lead to better outcomes than short term budget cuts.
This will focus on the following:
·
Areas
of the most significant demand pressures that the Council is facing
– emergency and temporary accommodation, adults social care
and children’s social care. These programmes will focus on
preventative work to reduce the need for statutory services, as
well as work on things like increasing the supply of temporary
accommodation at more affordable rates, and managing the adults and
social care markets.
·
Organisational
transformation – this will focus on improving the
Council’s use of operational assets and reducing the
associated revenue costs, a digital strategic programme to improve
efficiency and reduce demand, as well as making savings through
better procurement and contract management.
·
Commercialisation
– there are considerable opportunities to increase income
across the city, for example through activating the Council’s
seafront assets, increasing income through advertising, as well as
maximising fees and charges across our services.
5.12
A summary of the savings already identified from all the
workstreams outlined above are set out below. While significant
progress has been made, there is still a substantial gap between
the potential savings from these programmes and workstreams and the
MTFS gap.
|
Table 5: Savings
& Transformation Plans
|
|
|
2026/27
|
2027/28
|
2028/29
|
2029/30
|
|
£m
|
£m
|
£m
|
£m
|
|
Changes in
Delivery Models
|
0.300
|
0.200
|
0.000
|
0.000
|
|
Procurement &
contract management efficiencies
|
0.204
|
0.317
|
0.450
|
0.650
|
|
Transformation
Programme: Adult Social Care
|
8.892
|
4.150
|
2.900
|
1.850
|
|
Transformation
Programme: Homes & Homelessness
|
4.843
|
0.664
|
0.304
|
0.000
|
|
Transformation
Programme: Children’s Services
|
0.971
|
1.386
|
1.207
|
1.059
|
|
Transformation
Programme: Income & Commercialisation
|
1.305
|
1.087
|
1.860
|
0.260
|
|
Other Income
& Commercialisation Initiatives
|
0.160
|
0.100
|
0.200
|
0.000
|
|
Digital &
Innovation Initiatives
|
0.030
|
0.105
|
0.100
|
0.100
|
|
Service Redesigns
and Functional Alignments
|
0.704
|
0.255
|
0.305
|
0.120
|
|
Reduction or
reprovision of non-statutory services
|
0.830
|
0.199
|
0.199
|
|
|
Efficiencies in
delivering services
|
0.284
|
0.018
|
0.018
|
0.018
|
|
Other new funding
sources or repurposing
|
0.491
|
0.366
|
0.382
|
0.102
|
|
Asset Management
Strategy
|
0.775
|
0.088
|
0.000
|
0.000
|
|
Corporate
Landlord and Net Zero Programme
|
0.320
|
0.140
|
0.100
|
0.100
|
|
Less: proposals
that will reduce pressures already accounted for within the budget
gap
|
(7.663)
|
0.000
|
0.000
|
0.000
|
|
Total net savings
& transformation proposals
|
12.446
|
9.075
|
8.025
|
4.259
|
|
Budget Gap in
each year
|
24.926
|
23.020
|
22.368
|
16.344
|
|
Remaining budget
gaps
|
12.481
|
13.945
|
14.343
|
12.085
|
5.13
The February Report will provide a full MTFS and directorate Budget
Strategies which will indicate the overall direction of travel for
the delivery of services in each directorate and set out each
directorate’s approach to supporting Council Plan
priorities.
6
The Innovation Fund & Transformation Programmes
6.1
Achieving transformation and
change often involves significant one-off costs that cannot be
afforded from revenue and cannot normally be funded by capital
receipts or borrowing, for example, redundancy costs or project and
programme management staffing. The government has extended the
ability of all Local Authorities to use capital receipts to support
the transformation of services to deliver savings and efficiencies
(known as the Flexible Use of Capital Receipts) to March
2030.
6.2
The 2025/26 Budget approved in
February 2025 included a four-year Innovation Fund to 2028/29 with
a total investment need of £20 million to support the
transformation and change of services and invest-to-save proposals
over the period of the MTFS.
6.3
The officer-led Savings & Innovation Delivery Board and the
Corporate Leadership Team have designed a Transformation &
Innovation portfolio containing a number of strategic programmes.
This approach will make use of the Innovation Fund to strategically
prioritise one off resources towards addressing the budget
shortfalls across the MTFS. The overarching strategic programmes
are outlined in more detail in Appendix 3. To summarise the
strategic aims, the programmes are intended to:
·
address areas of high demand, implementing strategies to reduce
demand through investing in prevention and reducing the cost of
delivery;
·
review delivery models for services across the council to ensure
the most effective and efficient models are being used
·
explore the use of Digital Innovation & technology to enhance
and transform service delivery;
·
review and maximise the use of assets across the council, primarily
it’s property portfolio;
·
explore opportunities to increase revenue income and reduce the
cost of delivering services.
6.4
It is likely that to balance
the council’s MTFS, the council will further need to take
advantage of the ability to fund transformation through the
Flexible Use of Capital Receipts to support the MTFS over the
four-year period to 2029/30. Therefore, it is recommended that
Cabinet approve the Innovation Fund to be extended into 2029/30 on
the same basis as 2028/29. In addition, to support the
transformation activity across the council, the fund is recommended
to be increased to 28.140m in total to 2029/30, which is an
increase of £8.140m compared to the current fund commitment of
£20.000m to 31 March 2029. This increase recognises that the
fund will need to continue for an additional year to 31 March 2030,
as well as increase in overall value per year to support the scale
of the change necessary for the Council to become a financial
sustainable organisation.
6.5
The indicative Innovation Fund,
including the use in the current financial year, is shown in Table
6 below:
|
Table 6:
Indicative Innovation Fund
|
|
Category of
Investment
|
2025/26
|
2026/27
|
2027/28
|
2028/29
|
2029/30
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Transformation
& Innovation strategic programmes
|
1.200
|
3.300
|
1.400
|
0.700
|
0.700
|
|
Invest-to-Save
business cases
|
1.600
|
0.600
|
0.200
|
0.200
|
0.200
|
|
Digital and AI
Development
|
1.906
|
1.550
|
1.550
|
1.550
|
1.550
|
|
Managing Staffing
Changes (exit packages)
|
1.250
|
1.250
|
0.500
|
0.500
|
0.500
|
|
Enabling
Resources (e.g Project Officers, Workstyles Team, HR
etc)
|
1.030
|
1.226
|
1.226
|
1.226
|
1.226
|
|
Total
|
6.986
|
7.926
|
4.876
|
4.176
|
4.176
|
6.6
The investments are described
in outline below:
·
Transformation & Innovation strategic
programmes: Described further in 6.3 and Appendix 3, a Transformation
& Innovation portfolio has been established to address the
council’s budget gap across the MTFS strategically. The
strategic programmes within it will require one off funding of
resources and technology to enable the delivery of savings across
the MTFS. It is currently estimated that a total of £7.3m is
required across the period, which is likely to be front-loaded to
maximise the savings across the MTFS.
·
Invest-to-Save Business Cases: The medium-term planning process encourages
innovation and invest-to-save business cases aimed at complementing
the council’s Transformation & Innovation portfolio,
supporting the achievement of Council Plan priorities and,
importantly, contributing to the future financial sustainability of
the council. Business cases will need to demonstrate a return on
investment within a reasonable time period (max 5 years) but
ideally within the 4-year medium-term financial plan
period.
·
Digital and AI Development & Skills:
Digital and AI is a specific form of invest-to-save. The
council has already invested heavily in staff, systems and
technologies to provide improved digital and on-line services.
However, this process does not stop and as technologies, including
AI and robotics, improve and develop, the council will need to move
with the technology and ensure appropriate skills are developed to
make the most of any investment. Provision of at least £1.550
million each year is included but some of this cost could
potentially be transferred to revenue in later years if this is
affordable within the overall budget envelope.
·
Managing Staffing Changes: Transformation and change inevitably results in significant
changes to services which will entail changes to the mix or level
of staffing in services. This can lead to potential redundancies
which the council attempts to manage through holding vacancies or
redeployment as far as possible, but otherwise through voluntary
severance where this meets the council’s business case
criteria. This can involve significant redundancy and/or pension
strain costs. At least £4.0 million is expected to be required
over the period.
·
Transformation Enabling Resources: Ensuring that transformation and change can be
delivered requires resources that can be flexibly deployed across
different programmes or to ongoing long-term change programmes.
Informed by previous experience, the Innovation Fund provides
resources of £1.226m per annum to support a wide variety of
transformation, change and savings programmes and projects. This
will need to be reviewed as future budgets are developed and the
level of support for each change proposal is fully understood. The
costs are broadly expected to cover the following:
|
Table 7:
Transformation Enabling – Recurrent Annual Costs
|
|
Category of
Investment
|
Annual
Cost
|
|
£m
|
|
Project &
Programme Management Resources
|
0.766
|
|
Workstyles
Resources (to rationalise operational buildings)
|
0.180
|
|
HR Management of
Change Support
|
0.128
|
|
Leadership
Development
|
0.052
|
|
Finance
Support
|
0.100
|
|
Total
|
1.226
|
7
Capital Strategy and Capital
Investment Programme
7.1
The detailed capital strategy
and capital investment programme will be brought to the February
Cabinet & Budget Council as part of the budget report. Many the
Council’s capital investment plans fall within longer-term
programmes to support Council Plan priorities.
A Fair & Inclusive
City:
·
New Homes for Neighborhoods and Home Purchase
Scheme;
·
Purchase of and investment in new units for Temporary
Accommodation.
·
Investment in new build housing through the Housing Revenue
Account and Housing Joint Venture (with Hyde Housing);
·
Investment in maintaining and improving the Council Housing
Stock and building safety through the Housing Revenue
Account.
·
The Strategic Investment Fund (SIF) provides project
support for major regeneration programmes that draw in substantial
private sector investment.
A Healthy City where People Thrive:
·
Investment in a new leisure centre at King Alfred
site;
·
Investment in other leisure facilities such as the Withdean
Sports Complex swimming pool and 3G pitches at Moulsecoomb and Hove
Park;
·
The Education capital programme, which provides investment
from central government including New Pupil Places, Education
Capital Maintenance and Devolved Formula Capital for
schools;
·
Disabled Facilities Grant funded adaptations to support
independence at home.
A City to be Proud of:
·
Renovation and restoration of the Madeira
Terraces;
·
Development of Valley Gardens Phase III;
·
The Local Transport Plan (LTP) covering a wide range of
transport-related schemes;
·
Significant investment in coast protection programmes such
as the Brighton marina to River Adur scheme;
A Responsive and Learning Council with Well-run
Services:
·
The Information Technology & Digital Investment Fund to
maintain and upgrade the council’s infrastructure and IT
architecture;
·
The Corporate Systems Improvement (CSI) Programme to
improve the council’s core HR, Payroll, Finance &
Purchasing systems and associated applications;
·
The Asset Management Fund (AMF) to maintain operational
buildings, improve sustainability and reduce long-term maintenance
costs;
·
Corporate Planned Maintenance (PMB) to undertake planned
building works and upgrades;
·
Vehicle and plant annual replacement programmes.
7.2
Investment options and
requirements are kept under review, and any new programmes will
come forward to February Cabinet meeting subject to the
affordability of financing options, viable outline business cases,
or available capital resources including capital receipts. The
council’s financial position requires continual review in
terms of affordability, particularly where schemes are financed
from borrowing.
Capital Receipts
7.3
Capital receipts from the sale
of surplus land and buildings support the capital programme and the
Innovation Fund and the projections are regularly reviewed. The
Asset Management Strategy and Capital Asset Strategy seek to review
both the Council’s commercial property portfolio and the
operational portfolio to dispose of properties to support the
capital programme and Innovation Fund over the medium term and to
streamline the cost of managing property estates.
7.4
Capital receipts are under
severe pressure due to competing demands for the resources and the
certainty and speed with which capital receipts can be realised.
Additional staff resources have been deployed in Property and Legal
services to support the delivery of these capital receipts. In
addition to the Innovation fund, capital receipts are committed to
annual investment funds including the Asset Management fund,
Strategic Investment Fund and the Commercial Asset Investment fund
as well as commitments within already approved capital
schemes.
7.5
The table below reflects agreed
capital disposals and commitments against the receipts. Capital
Receipt commitments include existing and approved capital schemes
together with an assumed minimum investment in the Innovation Fund
of £28.140 million (see Section 6). The table shows a
shortfall in net capital receipts over the MTFS of £30.2
million. Further options to meet this resource requirement through
either additional capital receipts or reduced commitments will be
presented to Cabinet in due course.
|
Table 8: Capital
Strategy & Capital Receipts
|
Year
1
|
Year
2
|
Year
3
|
Year
4
|
Year
5
|
|
2025/26
|
2026/27
|
2027/28
|
2028/29
|
2029/30
|
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
|
Brought forward
balance
|
0.189
|
(6.586)
|
(10.425)
|
(19.488)
|
(23.769)
|
|
Expected Capital
Receipts
|
12.912
|
10.445
|
4.223
|
2.201
|
0
|
|
Innovation Fund
(Table 6)
|
(6.986)
|
(7.926)
|
(4.876)
|
(4.176)
|
(4.176)
|
|
Investment in
Temporary Accommodation
|
|
(4.000)
|
(6.000)
|
|
|
|
Other
Capital Programme commitments
|
(12.701)
|
(2.358)
|
(2.410)
|
(2.306)
|
(2.250)
|
|
Carry forward
balance (deficit)
|
(6.586)
|
(10.425)
|
(19.488)
|
(23.769)
|
(30.195)
|
8
Reserves Position and One-off resources
Review of
Reserves and Provisions
8.1
A one-off review of reserves and provisions has been undertaken
during November. This is annual exercise, but has been carried out
earlier in the year than previous years as a result of recovery
measures being implemented to address the 2025/26 forecast outturn
overspend.
8.2
Reserves and balances have been reviewed to identify balances that
can either be released, or held as part of a general risk reserve
rather than as individual earmarked balanced. This exercise has
identified £1.041m of earmarked balances that is recommended
for release to a newly created General Risk Reserve. Table 9 lists
the reserves recommended for release:
|
Table 9: Reserve
or Provision
|
Amount to be
Released £’000
|
Rationale for
release
|
|
Section 106
Interest Reserve
|
6
|
Unrequired
residual balance
|
|
Legacy LEP funds
Revenue Reserve
|
4
|
Unrequired
residual balance
|
|
Winter
Maintenance Reserve
|
540
|
Pool with other
risks under a general risk reserve
|
|
East Brighton
Parking Surplus Reserve
|
70
|
Release of
reserves following agreement to un-ringfence surpluses Transport
& Sustainability committee (6 Feb 2024)
|
|
Preston Park
Parking Surplus Reserve
|
275
|
|
Cemeteries
Maintenance Reserve
|
65
|
Pool with other
risks under a general risk reserve
|
|
Insurance
Provision
|
81
|
Change to reflect
revised bi-annual actuarial review
|
|
Total Reserves
& Provisions to be released
|
1,041
|
|
8.3
A further review will be undertaken before the February budget
report, and any further changes will be reported to Cabinet in
February.
Latest Financial Performance in 2025/26
8.4
The forecast outturn position in the current year is important
because it affects the availability of one-off resources. A
projected underspend adds to the one-off resources available while
a projected overspend will need to be funded from one-off resources
or carried forward to the next financial year, adding to the
financial challenge.
8.5
In-year financial performance is monitored through the
council’s Targeted Budget Management (TBM) framework and the
TBM Month 7 (October) report elsewhere on the agenda shows a
projected year-end General Fund overspend of £7.776m. The
overall overspend has reduced by £1.630m since TBM Month 5. A
one-off risk provision of £1.747m is not included within this
forecast. Therefore the TBM forecast needs to improve by at least
£6.029m by the end of the current financial year in order for
reserves to remain intact and not be drawn down to support the
2025/26 overspend.
8.6
The council’s share of the net deficit on the Council Tax and
Business Rates collection funds, after allowing for Section 31
grant, is forecast to be £1.764m and must also be funded from
one-off resources in the 2026/27 budget.
8.7
Table 10 summarises the potential resources and liabilities that
will need to be taken into account in setting the 2026/27 budget.
At this stage, this assumes that spending in 2026/27 will be in
line with the TBM Month 7 (October) report projections included
elsewhere on this agenda.
8.8
The table shows an estimated shortfall in one-off resources of
£1.764m after taking account of other expected one-off
requirements. This position is expected to change and will be
updated for the February budget report. The main factor expected to
affect the position is the latest TBM position which will be
updated for month 9 (December). As described in paragraph 8.5, the
call on one off resources assumes that the TBM forecast for 2025/26
will improve by at least £6.029m, and therefore there is a
risk that the need for one off resources will increase.
8.9
Additionally, a further review of in-year Collection Fund (tax
yield) performance will take place in TBM Month 9. Any improvement
will reduce the call on one-off resources and vice versa.
|
Table 10:
Projected One-Off resources
|
£m
|
£m
|
|
Revenue Budget
position 2025/26 (TBM):
|
|
|
|
- Forecast outturn
overspend (Month 7/October)
|
-7.776
|
|
|
- Application of
one-off risk provision
|
1.747
|
|
|
- Estimated
improvement due to recruitment & spending controls
|
6.029
|
|
|
Estimated 2025/26
Outturn
|
|
-0.000
|
|
|
|
|
|
Collection Fund
position 2025/26:
|
|
|
|
- Estimated 2025/26
Council Tax collection fund net deficit
|
-
1.195
|
|
|
- Estimated 2025/26
Business Rates Retention collection fund position
|
-1.137
|
|
|
- Contribution from Section 31 grant timing
reserve
|
0.568
|
|
|
Sub-total:
Projected Collection Funds position
|
|
-1.764
|
|
|
|
|
|
Shortfall before
allocations
|
|
-1.764
|
|
|
|
|
|
Current One-off
Resources Shortfall
|
|
-1.764
|
8.10
The table above indicates an estimated call on one-off resources of
£1.764m. The February budget report will need to identify
resources to fund this requirement.
8.11
There is a significant risk around the TBM position, with an
assumption that the current spending and recruitment controls and
directorate financial recovery plans will improve the forecast
outturn position for 2025/26 by at least £6.029m. As
highlighted elsewhere in this report and previous reports, the
council’s level of available reserves and balances is very
low, and therefore the need for one off resources of this level
potentially places the authority at serious risk of requiring
Exceptional Financial Support if the estimates of the one-off
resources and the forecast for 2025/26 required do no improve
significantly.
8.12
As indicated above, there are a number of factors that can affect a
change to these figures. Further work is also needed to fully
understand one-off pressures and consider options for mitigating
some of these costs and whether any appropriate temporary funding
mechanisms are available to support the one-off costs expected for
2026/27.
9.1
At this stage, the first draft budget proposals indicate that 11.7
full time equivalent (fte) posts could be deleted from the
council’s staffing structure, which is approximately 0.32% of
total staffing. Whilst a number of these posts will be vacant
during 2025/26, some proposals may initially result in some staff
being placed at risk of redundancy. This is difficult to estimate
with any certainty, but approximately 2.8 fte staff (not headcount)
have been potentially identified at risk at this stage if budget
proposals are agreed. The proposals currently have no TUPE
implications for staff. This information was shared with the
council’s recognised trade unions and the staff affected in
advance of the release of this report.
9.2
As in previous years, actual numbers of staff affected will be
highly dependent on the detailed options proposed, further savings
proposals coming forward in the February report and on the outcome
of formal consultation with staff and unions which will often lead
to changes to the original proposals. As previously experienced, it
is likely that any reductions in posts will be resolved through
normal turnover, or through redeployment to other vacancies across
the council, thereby minimising the risk of redundancies as far as
possible.
9.3
If the proposals do potentially
place any staff at risk of redundancy the council will support them
by:
·
Providing
appropriate support to staff throughout the change process to
enable them to maximise any opportunities available;
·
Controlling
recruitment and ensuring there is a clear business case for any
recruitment activity;
·
Managing
redeployment at a corporate level and maximising the opportunities
for movement across the organisation;
·
Managing the use
of temporary or agency resources via regular reports to Directorate
Leadership Teams (DLT’s);
·
Inviting
applications for voluntary severance where appropriate to staff
affected by budget proposals, subject to viability and approval on
a case by case basis.
9.4
These measures will remain in
place as consultation with trade unions, staff and other
stakeholders is undertaken. Where necessary, a targeted voluntary
approach to releasing staff in areas undergoing change will be
managed to support service redesigns whilst ensuring that the
organisation retains the skills that will be needed for the
future.
10
Housing Revenue Account (HRA) Budget & Capital Programme
10.1
This report is primarily
concerned with the development of the General Fund revenue and
capital budget. However, there are links to the Housing Revenue
Account (Council Housing) revenue budget and capital programme
which follow a separate budget setting process. Summary information
is provided below.
10.2
The Housing Revenue Account is
a ring-fenced fund dedicated to the management and maintenance of
the council’s housing stock. Legislation requires the HRA to
remain balanced; the council must demonstrate that projected income
will cover planned expenditure, thereby ensuring the
account’s long-term viability.
10.3
The prevailing economic climate
and operational challenges continue to place considerable strain on
HRA resources for 2025/26. Consistent with trends across the
sector, our authority faces increasing financial pressures. The
latest Medium Term Financial Strategy forecasts a deficit for the
HRA over the next 5 years. Contributing factors include a rising
number and cost of disrepair claims, significant investment
requirements to comply with the Building Safety Act, Fire Safety
Regulations, and the Social Housing Regulation Bill, alongside the
as the impact of inflation on services and financing
costs.
10.4
A particular ongoing challenge
is the investment required in 8 Large Panel System (LPS) high-rise
blocks across the city. While a staggered investment approach was
initially planned, the need to maintain short to medium term safety
standards now necessitates immediate and substantial revenue
investment. In 2025/26, temporary fire safety measures, such as
‘waking watch’ arrangements, have been introduced at
several high-rise blocks. Longer-term options for these LPS blocks
are under review, with associated capital investments to be
included in future budget proposals when cost estimates are
sufficiently robust.
10.5
Recent announcements from
central government have introduced a long-term rent policy,
enabling social landlords to increase rents by CPI+1% annually for
the next decade, with further consultation on rent convergence. The
current Medium Term Financial Strategy assumed this increase for
only five years; as such, the extension to ten years should enhance
the HRA’s financial sustainability over the long
term.
10.6
The HRA capital programme
focuses on two principal areas: improving the quality, safety, and
energy efficiency of existing council homes, and expanding the
supply of affordable housing. Investment in the existing stock is
primarily funded through tenants’ rents (including related
rent rebates) and HRA borrowing, both supported by rental income
over time. In contrast, new supply is largely financed by retained
capital receipts (including those from Right to Buy sales and
commuted sums), grant funding, and further HRA
borrowing.
10.7
The capital investment strategy
for 2026/27 to 2030/31 will be informed by the latest stock
condition surveys and the council’s Asset Management
Strategy, taking into account emerging priorities. Key objectives
include enhancing home safety and quality, ensuring compliance with
statutory regulations, and working collaboratively with
stakeholders such as the Regulator of Social Housing, East Sussex
Fire and Rescue Service, tenants, and leaseholders to shape our
planned works. In addition, ongoing investment in carbon reduction
initiatives will underpin the council’s commitment to
achieving carbon neutrality by 2030.
10.8
To increase the delivery of
affordable council homes, the HRA is progressing a range of
initiatives, including the New Homes for Neighborhoods Programme,
the Home Purchase Scheme, the Converting Spaces initiative, and the
Homes for the City of Brighton & Hove Joint Venture. These
programs are designed to ensure that newly delivered homes generate
a surplus, thereby supporting the sustainable funding of ongoing
maintenance and repairs.
10.9
Throughout 2026/27, efforts
will continue to develop the housing supply pipeline. The Home
Purchase Scheme will seek opportunities to repurchase former
council properties sold under Right to Buy, while the extended
scheme will pursue ‘off the shelf’ acquisitions to
further expand the affordable housing portfolio within the
HRA.
10.10
The Housing Revenue Account
budget and business plan will be reported to Cabinet for approval
in February 2026.
11
Schools Budgets and
Funding
11.1
The Dedicated Schools Grant
(DSG) is a ring-fenced grant that provides funding for Schools,
Academies, Early Years, Special Educational Needs and a small
number of allowable Central items. The DSG is allocated to schools
and academies on the basis of a National Funding Formula (NFF)
primarily driven by pupil numbers.
11.2
The DSG is divided into four blocks – the Schools Block, the
High Needs Block (HNB), the Central School Services Block and the
Early Years Block. Each of the four blocks of the DSG are
determined by separate national funding formulae (NFF).
11.3
In a similar way to the HRA,
the development and setting of schools’ budgets follows a
separate process involving statutory consultation and oversight of
the Schools Forum. However, there are links with the General Fund
budget setting process as General Fund budget proposals and savings
can potentially impact schools and vice versa.
11.4
Detailed announcements and full
allocations regarding the 2026/27 DSG will not be published by
Government until mid-December 2025. However, in November 2025, the
Department for Education (DfE) published provisional funding
allocations for mainstream schools and local authorities in 2026/27
through the schools and central school services NFFs.
11.5
Provisional funding for
mainstream schools through the schools NFF will total £50.9
billion in 2026/27. To simplify the funding system, the 2026/27
schools NFF will include funding for pay and national insurance
contributions costs that were previously allocated
separately.
11.6
On top of this rolled-in
funding, the core factor values in the 2026/27 schools NFF are
rising by 2.1%, to increase the funding available to schools.
However, as funding to schools is pupil-led, schools with falling
rolls will continue to be in a very challenging financial position
next financial year. This is in the context of unavoidable cost
pressures such as 2026/27 pay awards that are likely to absorb the
benefit of the 2.1% funding uplifts.
11.7
Local authorities will continue
to be responsible for operating local funding formulae, which will
determine the funding that individual schools and academies in
their area receive. To support moves to a more consistent funding
system, DfE will continue to require those local authorities which
are not already “mirroring” the NFF in their local
formulae to move closer to the NFF. Brighton and Hove is not
currently “mirroring” the NFF and it has been agreed
with Schools Forum that local formulae will move 30% closer to the
NFF rates in 2026/27.
11.8
The central school services
block funds local authorities for the ongoing responsibilities they
continue to have for all schools, and some historic spending
commitments that local authorities face. The central school
services NFF for 2026/27 includes funding for pay and national
insurance contributions costs that were previously allocated
outside the NFF.
11.9
Full allocations of schools and
central school services funding for 2026/27 will be published in
December, taking account of the latest pupil data at that point.
The publication of 2026/27 high needs block and early years block
allocations will also follow by the end of the year.
Updated School Balances Position
11.10
Detailed information relating
to the latest school and central DSG balances was contained in the
July 2025 budget report, however the most recent school balances
position is summarised below:
|
Table 11: Schools Balances
|
Nursery
£’000
|
Primary £’000
|
Secondary
£’000
|
Special
£’000
|
Total
£’000
|
|
Final 2023/24 balances
|
24
|
(1,143)
|
2,048
|
(648)
|
281
|
|
Final 2024/25 balances
|
163
|
(2,665)
|
(395)
|
274
|
(2,623)
|
|
Movement
|
139
|
(1,522)
|
(2,443)
|
922
|
(2,904)
|
11.11
At the end of the 2024/25
financial year school balances for maintained schools within the
council showed a net deficit position of £2.623m. The net
deficit is expected to increase further in 2025/26, with a forecast
year-end net deficit in the region of £5.7m. School deficits
is an increasing challenge in Brighton and Hove, and active
engagement is taking place with schools to address these
deficits.
12
Analysis & Consideration of any alternative options
12.1
The setting of the General Fund
budget in February allows all parties to engage in the examination
of budget proposals and put forward viable alternative budget and
council tax proposals, including amendments, to Budget Council on
26 February 2026. Budget Council has the opportunity to debate the
proposals put forward by the Cabinet at the same time as any viable
alternative proposals.
13
Community Engagement & Consultation
13.1
This report will be shared
widely with key stakeholders and partners as it signals to all
parties the anticipated financial challenge facing the council for
next year and beyond, notwithstanding the imperfect funding
information available at this stage.
13.2
The development of the
council’s budget and future plans is a major undertaking and
proposals can affect a wide range of services and therefore have
impacts on residents, businesses, visitors and staff. Appropriate
and necessary statutory consultation and engagement will be
undertaken with residents, service users, staff, unions, partners,
business representatives and the community and voluntary
sector.
13.3
Detailed consultation and
engagement plans will start over coming weeks, in advance of any
proposals coming forward for Cabinet in February 2025 for full
Council approval. However, consultation and engagement is expected
to include the following:
General Information
13.4
General information and advice
about the council’s budget will continue to be provided
through the council’s website which provides information and
infographics on how money is spent on services, where the money
comes from, the council’s capital and transformation
investment plans, and a summary of the financial challenges ahead.
These materials will continue to be promoted through various media
and communications throughout the budget setting
period.
Engagement on the draft budget
13.5
The Council’s overarching
budget proposals will be published through a range of channels to
ensure that residents and community groups have an opportunity to
comment on these, and for this feedback to be considered in the
final budget report to Cabinet in February 2025.
City Partners
13.6
Information will also be shared
with City Partners through the City Management Board and other
channels. In particular, the council continues to engage fully with
the NHS Sussex Integrated Care System to ensure that the budget
processes of the two organisations are aligned and communicated as
far as practicably possible.
Business Engagement
13.7
There is ongoing liaison and
discussion with the Economic Partnership that covers potential
funding sources and bids, city regeneration, economic growth,
employment and apprenticeship strategies. Officers of the council
and members of the Administration meet periodically with
representatives of the Chamber of Commerce and B&H Economic
Partnership to discuss the council’s high-level plans and
over-arching budget situation. Formal consultation will also take
place with business rate payers in line with statutory
guidance.
Schools Community
13.8
The Schools Forum, a
consultative body attended by representatives of all school phases,
will primarily focus on the allocation of the ring-fenced Dedicated
Schools Grant (DSG) funding across the relevant budget
‘blocks’ but will also be periodically informed about
the General Fund budget position and proposed changes to council
services where these may have implications for schools. Engagement
with the schools forum will take place in January.
Third Sector Engagement
13.9
A key stakeholder is the
Community & Voluntary Sector, and communications and meetings
with representatives of the sector are planned to provide an
opportunity to feedback views to the council and members which will
inform final budget proposals. The Council funds lots of activity
within the voluntary and community sector, through the Thriving
Communities Fund, the Household Support Fund (which will become the
Crisis and Resilience Fund in 2026/27) and the Fairness Fund.
Crisis and Resilience Fund allocations have not yet been announced
by government, plans for voluntary and community sector funding
will be finalised once these allocations are clear.
Staff and Union Engagement
13.10
Consultation and engagement
with staff and unions is also very important. The scale of
financial challenge indicates further significant impacts on the
configuration and/or provision of services which will inevitably
entail staffing changes. Meetings with the council's recognised
unions, including appropriate officers and members of the
Administration, will be scheduled regularly to keep unions abreast
of developing proposals and to ensure they have sight of where
support to their memberships may be required. The council’s
Joint Staff Consultation Forum will continue to provide a formal
setting for sharing and raising matters relating to the overall
budget process and development.
13.11
Detailed proposals have been
shared with Departmental Consultative Groups (DCGs) and through
line management. Formal consultation and engagement with directly
affected staff will be undertaken as normal, including relevant
union representation, under the council’s Organisation Change
Management Framework.
Specific Consultation
13.12
It is recognised that specific
consultation will be required for individual proposals. CLT and
DLTs will lead on this engagement where there are changes to
service delivery models or changes to policy frameworks that
underpin how we provide services to residents and
businesses.
Timetable
13.13
The timetable for final budget proposals is given in the table
below. This timetable does not include detailed plans for ongoing
consultation with stakeholders as this will be determined in
conjunction with those involved.
Table
12: Budget Timetable
|
Date
|
Event
|
Notes
|
|
3 Dec
2025
|
Publication
|
Publication of
Draft Budget proposals on the council’s web site
|
|
11 Dec
2025
|
Cabinet
|
Draft Budget
& Resource Update report;
Budget Monitoring
(TBM) month 7 report.
|
|
Dec to
early-Jan
|
Development of
further budget proposals
|
Further work and
refinement of draft budget proposals incorporating the impact of
the Provisional Local Government Financial Settlement
|
|
w/c 15
Dec
|
Provisional Local
Government Financial Settlement
|
Receipt and
analysis of the provisional settlement expected before Parliament
recess for Christmas (18 December 2025)
|
|
Jan
2026
|
CFO/HR/Unions
|
Further sharing
of any additional budget proposals affecting staff
|
|
19 Jan
2026
|
Joint Overview
and Scrutiny committee
|
Draft Budget
& Resource Update report: presented at both Place & People
Overview and Scrutiny Committees
|
|
22 Jan
2026
|
Cabinet
|
Council Tax Base
report;
Business Rates
tax base report.
|
|
By 3 Feb
2026
|
Department
Consultative Group’s
|
Sharing overall
final budget package and staffing impacts (assuming publication on
4 Feb)
|
|
4 Feb
2026
|
Publication
|
Publication of
Final Budget proposals on the council’s web site
|
|
12 Feb
2026
|
Cabinet
|
General Fund and
HRA Revenue & Capital Budget reports;
TBM month 9
report.
|
|
26 Feb
2026
|
Budget
Council
|
General Fund and
HRA Revenue & Capital Budget reports.
|
14
Financial
Implications:
14.1
The financial implications are
contained in the body and appendices of this report.
Finance Officer consulted: Haley
Woollard
Date: 02/12/25
15
Legal Implications:
15.1
The process of formulating a
plan or strategy for the council’s revenue and capital
budgets falls within the Allocation of Responsibilities for
Functions for the Cabinet under Part 2E of the
constitution.
15.2
This report complies with the
Council’s process for developing the budget framework, in
accordance with the Council’s Budget and Policy Framework
Procedure Rules as set out in Part 3D of the
Constitution.
Lawyer consulted: Elizabeth
Culbert
Date: 01/12/25
16
Risk Implications
16.1
There are a range of risks
relating to the council’s short and medium term budget
strategy including the ongoing economic impact of the higher
inflationary environment, the impact of the cost-of-living crisis,
further potential reductions in grant funding, the impact of
legislative changes, and/or other changes in demands. The budget
process will normally include recognition of these risks and
identify potential options for their mitigation. In the current
financial climate, the level of risk that the council may be
prepared to carry is likely to be higher than in normal
circumstances.
17
Equalities
Implications:
17.1
The Council’s
well-established screening process to develop Equality Impact
Assessments (EIAs) has been used to assess the impact of
significant budget changes included within the proposals in
Appendix 1. Draft EIAs have been included in Appendix 4. Key
stakeholders and groups will continue to be engaged as final EIAs
are developed but it will also be important to consider how
members, partners, staff and unions can be kept informed of EIA
development and the screening process. In addition, where possible
and proportionate to the decision being taken, there may be a need
to assess the cumulative impact of the council’s
decision-making on individuals and groups affected in the light of
funding pressures across the public and/or third sectors. The
process will ensure that consideration is given to the economic
impact of proposals.
18
Sustainability
Implications
18.1
The council’s revenue and
capital budgets will be developed with sustainability as an
important consideration to ensure that, wherever possible,
proposals can contribute to reducing environmental impacts and
support progress toward a carbon-neutral city.
19
Health and Well-being
Implications
19.1
The council’s budget
includes very substantial provision for expenditure on Adult and
Children’s Social Care, Public Health, Housing and
Homelessness, Welfare Assistance (for example the Council Tax
Reduction Scheme), Education and Skills, and many other essential
services that support vulnerable people and children, and
households on low incomes or experiencing homelessness. These
services contribute significantly to the health and well-being of
thousands of residents and the wider population, upholding the
council’s priority to support ‘A healthy city where
people thrive’ and engender ‘A fair and inclusive
city’.
20
Conclusion
6
7
8
9
20.1
The council is under a statutory duty to set its budget and council
tax before 11 March each year. This report sets out the latest
budget assumptions, process and timetable to meet the statutory
duty. The Provisional Local
Government Finance Settlement is due to be announced week
commencing 15 December 2025, which will provide the certainty for
the final envelope of resources that the Council will receive for
the three year period to 2028/29, which will provide the basis of
the final MTFS which comes to Cabinet and Budget Council in
February 2025. The current set of budget proposals do not fully
address the Budget Gap in either 2026/27 or across the MTFS, and
therefore further options are being explored for the February
report. If sufficient proposals cannot be found or agreed, then the
Council is at risk of needing to seek Exceptional Financial Support
from government in order to produce a legally balanced budget for
2026/27.
Supporting
Documentation
Appendices:
1.
Detailed savings
2026/27
2.
Core
Planning Assumptions
3.
Transformation
Programmes & Innovation Fund
4.
Equality Impact
Assessments for budget proposals
5.
Review of
Reserves and Provisions